Canberra Carbon Race

The United Nations climate change confab is in December, and Australia's ruling Labor Party is eager to show "leadership" beforehand by passing a sweeping emissions trading scheme. Luckily, the Senate in Canberra is showing more common sense.
In a show of unity Thursday, the opposition Liberal Party and its coalition partners voted en masse to reject Prime Minister Kevin Rudd's flagship proposal. Mr. Rudd and climate change minister Penny Wong want to cut carbon emissions by between 5 to 25%, depending on what is agreed at the U.N. meeting in Copenhagen. Their bill would force most of Australia's biggest companies to adhere to emissions limits or buy pollution permits from Canberra or from other countries selling tradeable permits. Canberra would then redistribute the wealth as it saw fit.
Opposition leader Malcolm Turnbull opposes the bill because it's too onerous on business. The Treasury estimates it will collect $11.5 billion Australian dollars ($9.6 billion) in the first two years of the scheme, which is set to start in 2011. Companies will pass those costs straight to consumers. The bill could raise consumer prices by 1.1% and shave 0.1% off annual GDP to start. Canberra hasn't released any studies on the potential impact on unemployment—an odd omission, given joblessness has been trending upwards amid the global economic downturn.
Mr. Rudd's plan also represents a transfer of wealth abroad. Many of Australia's biggest exporters are raw material producers who would be hit hard by the government's restrictive emissions targets. It may be cheaper for them to buy emissions permits offshore than to retool their operations back home. Never mind that Australia only counts for 1.5% of total global emissions, so Australians would bear this cost without it making an iota of impact on the global climate.
The Rudd government is trying to push the bill through before the public can come to grips with the fine print. Banking on its majority in the lower house and Mr. Rudd's personally high approval ratings, the Labor government didn't negotiate at all with the Liberals before Thursday's defeat. They are still trying to strong arm their opponents. Ms. Wong said after the vote "this government is not going to give up; we will be bringing this bill back before the end of the year." Mr. Rudd called the vote "the most appalling collapse in the authority of Liberal leadership" he had ever seen.
It is, in fact, the best leadership the Liberals have seen in some time. Since the Howard government fell in late 2007, the opposition has bickered over how best to address a shift in public mood that favors some sort of environmental legislation. Mr. Turnbull, a former banker, wants a "greener, cheaper [and] smarter plan" that business could live with. The longer he can keep the party united and stall Mr. Rudd's bill, the more time he'll have to garner industry's backing—a shift which is already underway.
There are already signs that Labor's position is weakening. The government piggybacked a renewable-energy target bill to the emissions trading bill, but yesterday Ms. Wong said Labor would decouple the two bills, in a win for the opposition. Mr. Turnbull says he's willing to bargain. If Australia wants to brag in December, best to bring a green idea that encourages innovation, rather than taxes and redistributes wealth.